Arbitration, Litigation, Mediation
According to the American Arbitration Association, "[a]rbitration is a time-tested, cost-effective alternative to litigation . . . . [and] AAA arbitrators possess years of industry-specific knowledge and experience." Most cases administered by AAA are resolved within one year, giving business owners adequate assurance that they can quickly resolve their disputes and get back to business as usual.
However, the cost of AAA arbitration is oftentimes not beneficial in comparison to the filing fees charged by the clerk of courts for administering the same dispute. To initiate AAA arbitration on a claim valued between $1 million and $5 million, the initiating party must pay AAA filing fees totaling $11,450, which only secures AAA's services; they do not cover the cost of the arbitrator, expenses, reporting services or charges incurred to enforce the award. The filing fees make AAA-administered arbitration an expensive undertaking. However, before deciding whether your contract should require AAA arbitration, business owners should consider the recent major revisions to the AAA Commercial Arbitration Rules, which are aimed at empowering the arbitrator to actively manage and quickly resolve disputes:
• Preliminary Hearing (Rule 21) – the parties and the arbitrator establish a procedure for the arbitration aimed at achieving a fair, efficient and economical resolution.
• Emergency Measures/Injunctions (Rule 38) – a party may now seek emergency relief prior to the appointment of an arbitrator.
• Discovery (Rule 22) – the arbitrator has authority to manage and control the discovery process and the costs associated with it.
• Sanctions (Rule 23) – the arbitrator may issue orders to enforce the discovery obligations and orders of the arbitrator no differently than if a trial court were presiding over the proceedings.
• Dispositive Motions (Rule 33) – an arbitrator may rule on dispositive motions as a means of quickly disposing of frivolous or legally unsupported claims.
• "Mandatory" Mediation (Rule 9) – provides the parties with the opportunity to consider and discuss mediating the dispute.
• Remedies for Nonpayment (Rule 57) – addresses the nonpayment of required fees and even allows a party to advance the fees of a non-paying party, if needed.
These "major" changes to the AAA's Commercial Arbitration Rules are aimed at making AAA-administered arbitration more streamlined and cost-effective for business owners.